At a time when many homeowners are walking away from their homes and letting them be foreclosed on, others who are hanging in there may be racking up delinquencies by not paying their Homeowners Association Fees which ultimately hurts not only the HOA but also the entire development and its owners.

Those delinquencies can make it very difficult for homeowners in the same development to sell their home. "I would bet that there's not a community out there that doesn't have some delinquency," says Ira Ginsberg, vice president of First Choice Financial Solutions. The company purchases the delinquencies from the HOA, provides immediate cash to the HOA, and then proceeds to collect the funds from the delinquent homeowner.

Ginsberg and Steve Lippman, president, both have extensive experience in real estate including property management, development, and investments. The pair, along with a third partner—an attorney, launched their business this year. "I was trying to find a way to help our associations to stay alive," says Lippman.

There are a few other companies doing this. "There's an opportunity here. We think the business model works for our purposes and it creates an opportunity to help out these Homeowners Associations and Condo Associations," says Ginsberg Lippman, who runs a property management company in Florida says, "I noticed over the last couple of years my clients kept calling me up and they were cutting back on their services. … [Homeowners] were not paying their maintenance payments, therefore they were cutting back on the property manager's hours, on the landscaping, … on the secretarial staff, … you name it, they were cutting back on all the services because there was a deficit; they couldn't operate the associations anymore." When delinquencies occur in developments even those who pay regularly and on time are negatively impacted.

"When an association has more than 15 percent delinquencies, the association does not qualify for any type of financing for any buyer in the community," says Lippman. Ginsberg adds that cash buyers and possibly local bank loans would be options, but he says most loans are through Fannie Mae and the guidelines won't allow delinquencies in the double digits.

"Once they hit that threshold, it's very problematic for these communities," says Ginsberg. "Whether they paid their HOA fee or not, they can't sell because people can't finance it." Also, special assessment fees could be added on to make up for the delinquent fees shortfall. "We can alleviate a lot of these issues. We're not all inclusive. We don't give 100 percent of all of the dollars that are delinquent but we can alleviate a good percentage and get them back on their feet," says Ginsberg.

According to the company, here's how the program works. "Through the program offered by First Choice, associations receive immediate non-recourse capital to offset delinquent assessment balances. There's no cash outlay required by the association, and no cost or risk of any kind. The association is relieved of collection expenses and burdens as First Choice takes this over. The association stays on budget and there's less need to levy special assessments." First Choice makes its money by collecting interest and late fees, all legal under state law.

"Not only do we serve a purpose where we're going to help so the communities can pay for their landscaping, security, and services they need, but it also puts them in a financial position where lenders will lend on these communities," says Ginsberg.

The pair say that their business is not coming from a collection agency background, rather this company hopes to educate homeowners about the need and importance of staying current with their HOA payments. After all, if it affects one it may affect all in the development.

Published: April 23, 2010

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Phoebe Chongchua is an award-winning journalist, an author, customer service trainer/speaker, and founder of Setting the Service Standard, a customer service training and consulting program offered by Live Fit Enterprises (LFE) based in San Diego, California. She is the publisher of Live Fit Magazine, an online publication that features information on real estate/finance, physical fitness, travel, and philanthropy. Her company, LFE, specializes in media services including marketing, PR, writing, commercials, corporate videos, customer service training, and keynotes & seminars. Visit her magazine website: www.LiveFitMagazine.com. Phoebe's articles, feature stories, and columns appear in various publications including The Coast News, Del Mar Village Voice, Rancho Santa Fe Review, and Today's Local News in San Diego, as well as numerous Internet sites. She holds a California real estate license. Phoebe worked for KGTV/10News in San Diego as a Newscaster, Reporter and Community Affairs Specialist for more than a decade. Phoebe's writing is also featured in Donald Trump's book: The Best Real Estate Advice I Ever Received and The Complete Idiot’s Guide to Buying Foreclosures. She is the author of If the Trash Stinks, TAKE IT OUT! 14 Worriless Principles for Your Success. Contact Phoebe at (858) 259-3646 or . Visit PhoebeChongchua.com for more information.